What Did You Do?

It’s bad enough explaining to yourself, but if you also have to explain it to other people after you had a hard time convincing yourself, then your work is really cut out for you.

Today I made one of those trades that takes some explaining.

The explanation probably can go all the way back to the original trade that sought to eke out some option premiums from a real non-performing position.

The was “The Gap.”

Actually, for 2017, I had made 9 trades on the position, in order to try and cut down the large paper loss that I’ve been sitting on for far too long.

The recent problem, though, had been that I sold $24 calls on the position and then The Gap made a strong move higher and I really didn’t want to see the shares taken away from me.

So last week, I actually rolled the position over to September 2017.

Unfortunately, the only way I could get a decent premium was to go out that far.

Doing that also would likely give me one more dividend.

With that trade, the cumulative premiums received in 2017 was up to $3.35, plus $0.46 in dividends and maybe another $0.23 in July.

Still I didn’t want to lose the shares.

Today, as The Gap has gone back below $24, I saw an opportunity, even as that opportunity took $0.98 away from my accumulated premiums.

The thing about the trade that made it appealing though, was that I was able to buy back those September 2017 $24 calls and then sell June 2017 $25 calls.

So, in the event that the shares may recover over the course of the next 4 weeks, the $0.98 debit incurred today would be offset by the additional $1.00 in strike price.

More importantly, though, was that I didn’t have to see the position sit until September 2017 on what would essentially have been dead money and I was given a new chance to trade the position as the end of the June 2017 option cycle rolls around.

Now, instead of hoping that The Gap shares would retreat toward $24, I’m hoping that they recover and start heading back toward $25.

If they do, I might still then have opportunity to keep making those weekly kind of trades rolling the short calls over and get back to the work of accumulating more and more premium.

That’s been a good formula for 2017 and I’ve enjoyed getting into the rut of selling the same positions over and over again.